Retail Waves in India

The first wave of change which has revolutionized the Indian retail sector was (liberalization,
globalization and privatization) 100% FDI was permitted under automatic route for trading
companies for cash and carry trading and wholesale trading. FDI up to 51% under
government route was allowed in retail trade of single brand products. The Industry (Retail)
in the Country is very dynamic and Erratic. Exceptional growth in this sector has been
observed in the last few decades. India has become an attractive destination for the Retail
Giants outside the country. This has in turn changed the formats and retail marketing
structure in the past Many Years. This extra-ordinary growth has paved the way to entry of
organized retailing in urban and rural areas. Traditionally, Indian retail sector is fragmented
and unorganized. This has led to a continuous change in consumer purchase behaviour and
marketing theories. The Various stages in the retail industry in the last few decades are
deliberated as below along with the Key Drivers instrumental in ensuring this exceptional and
Radical evolution of Retail Industry in India The retail sector in India is emerging as one of
the largest sectors in the economy. Indian retail industry has Grown over the years, it is still
highly fragmented, with an estimate of 12 to 15 million outlets. The total market size was
estimated to be around $600 billion in 2015, registering a CAGR of 7.45%. Retail industry is
expected to grow to $1.3 trillion by 2020, registering growth at a CAGR of 7.46% . The
overall retail sector growth is in sync to grow at a CAGR of 12-13%, which would be Rs 55
trillion in 2018-19 (KPMG).

Post 1947 (India)

The economy Started to open up in the 1980s resulting in the change in retail Industry.
Bombay Dyeing, S Kumar's and Raymonds were the Organisations that came up with retail
chains in Textile. Few Years Later, Titan launched retail showrooms in the organized retail
sector

Post Globalisation (India 1990-2000 Era)

Globalisation/Economic Reforms - Modern retail grew Exponentially in India with the
liberalization and globalization of Indian economy in 1990's. Due to Globalisation, Indian
markets have witnessed increase in consumer Disposable income and increase in
purchasing power. Shopping malls emerged in the urban areas giving a world-class
experience to the consumers. Which created emergence of hypermarkets and supermarkets.
Retailers Like Pantaloons, Shoppers’ Stop and Lifestyle entered the Indian Retail Market
and set up their chain of outlets across the country. Moreover, Foreign brands made entry into
India included McDonald’s, Benetton, Levi Strauss, Adidas, Reebok and Nike, The latter half
of the 1990s Had a fresh wave of entrants with a shift from Manufactures to Retailers For
Example; Food World, Subhiksha and Nilgiris in food and FMCG, Planet M and Music
World in music, Crossword and Fountainhead in books. Post 1995 onwards, It was an
emergence of shopping centres in urban areas with car parking, targeted to provide a
complete destination experience for all segments of society. Emerging of hyper and super
markets trying to provide customer with Value/Variety/Volume.
Post Globalisation and FDI(Key Drivers):

Cosumerism

Population
Urbanisation
growth
Retail
India

Govt
Technology
Policies

Change in Consumer Preference:

Retail has seen a major change the consumer behaviour over a period of time. Starting with
Shifts in Consumption Patterns Since ages, Survival had been the primary motto of private
consumption in India. With the impact of the sustained economic growth of Previous
decades, for a large part of the population, consumption has moved beyond these basic
survival needs.

With increase in the disposable income, availability of easy credit and a large number of
brands to choose, the Indian customer has increased the base of its consumer spending, a
boost indicator for expenditure on goods and services.

while food and grocery continue to account for the largest quantum of spending followed by
healthcare and textiles and clothing, more interestingly, spending on non-basic needs like
mobile phones, jewellery, watches and transportation and their related items, has grown much
faster. Even consumer spending on personal computing and personal grooming services
picked up its pace in strong double digit growth.

It is argued that the average Indian household spending of 80 per cent of its discretionary
income on various categories increased from just 7 in 1991 to 19 in 2009. While the Previous
decades has seen significant addition to consumption and retail market, it is expected that
consumption is likely to double in India over the next 5 years,
The changing composition of work force and growing number of women employees in public
and private organizations i.e. the participation of women in professional and technical
workforce in India is 34% and 21 % respectively (NCEAR report, 2005) contribute a lot to
the paradigm shift in consumerism. The accelerated growth in employment from 1.6% levels
of 1993-2000 to 2.5% during 1999-2005 is also the good facilitator of growing consumerism.
Intrinsic factors such as needs, motives, perceptions, and attitudes, interests, opinions,
activities and lifestyles mostly influenced the consumerism in a rapid changing environment.
Personal and social motives are the most influential in increased consumerism and creating
necessity for modern retail formats that cater to meet the preferences. Consumers' motives are
positively related to their pleasure and satisfaction while shopping in modern retail outlets

Population as Growth Driver:

The population size of India, and its demographics, is itself a major motivator to the retailers.
The population of India is the 2nd largest in the world, is almost equal to the combined
population of Many Developed and Developing Countries.

Over the previous census literacy rates, the growth in the female literacy rates is greater than
the male literacy rates. This means that the fraction of women in the workforce is going to
increase further.

In 1981 the proportion of women in workforce was 20 per cent, and it rose to 23 per cent in
1991, further rising to 26 per cent in 2001. It was estimated to be around 30- 35 per cent at
2009, translating into 150-170 million women. Traditionally most women have been working
in the unorganized sector.

There are three major factors driving this growth: greater acceptance and empowerment of
females, delayed family phase and reduced child bearing responsibilities. It is expected that
there is a potential of growing exponentially in the current situation in the next 5 years.

This Growth has resulted in a big shift in the consumption and shopping behaviour of this
segment-paving the way for several opportunities for consumer goods and service provider
companies, marketers, retailers, etc.

Age-wise, Maximum Indian population is young compared to those in developed Countries.

As per Booz & Company, 60 per cent of the Indian population falls in the range of 15-
44 years There are multiple ways in which the growing younger population is supporting
consumption. The profile of the young population reveals more actively employed people.
This means, increased incomes available in households to spend on expendables. Young
people tend to spend more compared to their parents and grandparents, and are easily
attracted towards fancy and high end products and they more exposed to the media and its
influences, specifically new platforms such as the internet, mobile phones etc. Their
awareness levels are higher, and they are better informed about developments around them.
Continued favourable age distribution is a driver for retail consumption in the future as
well.
Urban Expansion:
As the economy of every major country in the world grows, it is observed that the country
experienced a shift in its urbanization rates.

From 2001 through 2008, India's urban population grew 58% faster than the population of the
country as a whole

A Research by McKinsey predicted that by the year 2030 India will have a population of 1.47
billion and 40 per cent of the population will live in urban areas. Thus, the urban population
will grow to about 590 million approx,

More income and wealth is concentrated in urban areas, which in turn affected the where and
how retailing growth consistently. Three major implications were expected to be experienced
because of this urbanization. First, retailing has not grown evenly; rather, it has grown at a
higher rate in urban areas that can accommodate and will require both organized and
unorganized retailers. Second, urban retailing is likely to remain the strategic focus of
organized retailers because there will be increasingly more numerous and more affluent
consumers to serve in that market. Third, whatever investments organized retailers do, some
of these are likely to be made in rural areas close to towns and cities pushing the much
needed stimulus to rural economy.

The rapid growth in urbanization has facilitated organised retailing in India, and has caused
the speedy migration of population into major tier I and tier II cities, which have a significant
share in the retail sales of the country. The urban population ‘s contribution in India ‘s GDP
shot up from 29% in 1951 to 60% in 2001 and is expected to increase to 70% by 2020, as
migration to cities and towns grows rapidly in anticipation of higher income opportunities
provided by these epicentres. Moreover, the continuous development in urban areas has
invariably attracted substantial inflows of capital both from domestic and foreign investments
have led to the transition of urban areas. As the Indian organised retail is mainly concentrated
in the urban areas, its growth (urban areas) is imperative for the organised retail in the
country. Furthermore, due to the rapid infrastructure development in major tier I, II and III
cities, many rural inhabitants are attracted to cities, which increase the urban per capita
income and in turn offers unbound opportunities for the organised retail segment. Increased
globalisation has also played a big role in the development of urban areas.
Consumerism; next 5 years in Retail

Consumer feedback and satisfaction has always been the first goal for retailers, and in the
Next 5 years, customers will be more empowered than ever to drive the change they need, as
they get more control over their retail experience.

Technology, the internet, telecom and analytics; is being used to do anything and everything
a customer is not interested in. Consumers want to explore. But they need to have easy access
to items they choose to use all the time. The historic trade-off between price and service has
been changed by technology and consumers would save time and enjoy the experience while
saving money. Consumers would fulfil their everyday needs; items like laundry Items
(Detergent, paper, light bulbs, grocery staples and shampoo) – in the easiest way possible
through a combination of stores, e-commerce, pick-up, delivery and supported by artificial
intelligence. Consumer desires, think latest fashion, fresh produce, and items they’ve never
seen before, will still be fun to explore in stores as well as with technology Virtual Reality
may be a possibility.

Retailers who provide a truly unique, enjoyable experience and prepare their vendors to
provide excellent service will have the advantage. Major Retailers like Walmart and
Pantaloons already see the value customers place on personalization and convenience,
through their success with grocery pick-up and delivery in several markets around the
Country.

Urbanisation in the next 5 years in Retail

Between 2019 and 2024, the number of city incumbents will increase from 33% to 46%
approx of India’s population. This suggests a shifting set of preferences, rural space to the
accessibility of city life. The way individuals are choosing to live is changing and will have a
significant effect on the consumption pattern over the next few decades Consumption would
be rapidly rising in tandem with urban growth. By 2024, urban consumers will be touching a
60 Billion per year into the Indian Economy. Consumption growth in the future will be
increasingly dependent upon a concentrated group of urban individuals. In the coming years,
the urbanised Residents/individuals will have greater share of income at their disposal—
increasing their spending power and driving growth. While urbanization in emerging market,
and Asia will play an undeniable role in growing this new class of metropolitan consumers,
retailers will need to remain focused on wealthier regions, particularly Metros.
Changes in Retail in the next 10 Years
The Indian retail sector is evolving rapidly. Recent policy changes and greater external
liberalisation of retail sector will bring many more foreign retailers to India. It is expected
that FDI will accelerate the growth of organized retail. India‟s huge population with large
proportion of young, increasingly brand- and fashion-conscious population, high potential
growth in consumer expenditure, growing middle class are some of the factors due to which
the recent trends for the sector looks encouraging. Organized retail whose share in total retail
was 12% approx in 2018 is expected to assume 24% approx share of total retail market in
India in 2030.
Mass Grocery and Apparel are segments growing faster than other segments of retail. In next
decade, multi-brand organized(MBO) retail is expected to expand in specialty stores such as
Consumer Electronics, Footwear, Furniture and Furnishing etc.

Consumerism in the next decade

Retailers will constantly need to evolve, innovate and unify their omnichannel efforts so
shoppers’ paths to purchase are as frictionless as possible

Retailers would have plans to virtually try on new looks for a consumer at a local store event
along-with friends Retailers would ensure a successfule party/Get-together in minutes by
having items sent to consumers home by drone. Consumer would find that coveted birthday
gift for the children with just a few clicks/Internet and it lands on the doorstep. Retailers
would start using a multitude of social and in-store receptors, like surveys, contests and
interactive apps, retailers and brands will know more about what consumer want, from what
style shoe customer like to lipstick which looks good on the skin tone, and use that data to
roll out more effective, personalized and interactive marketing campaigns.

Urbanisation in the next 10 years

By 2030, over 40% of people will live in cities. This move suggests a shifting set of
preferences away from the comforts of rural space, to the accessibility of city life.
Today, 62% of millennials say they prefer urban living. cities offer the most promising career
options for ambitious, competitive talent, as well as convenient access to shops, restaurants,
and cultural resources.

Consumption is expected to rise rapidly along with urban growth. In fact, by 2035, urban
consumers will inject $30 trillion per year into the world economy. This consumption will be
highly concentrated. Between 2015 and 2030, analysts expect just 32 cities to generate one-
quarter of the world’s total urban consumption growth.
Consumerism- Industry Focus in the coming future
Based on the present scenario and future projections the following are projected as the future
prospects of Indian retail industry.

• Organised retail will form 10% of total retailing by the end of this decade. In the meantime,
the organised sector will grow at rate of around 30 % per annum

• India to have nearly 1000 shopping malls by 2030, there by paving way or opportunities
galore in real estate sector

Retail Penetration in Kids Mkt: According to research, the branded segment comprises US$
701.7 million of the total kids' apparel market-size of over US$ 3 billion. Leading the kids'
retail turnaround is the apparel business, which accounts for almost 80% of the revenue.

• There will be heavy increase in the turnover of the farming sector due to the efficiencies and
improvement in logistic and supply chain management
• Retail sector is estimated to create 50,000 jobs per year in the next five years.

Urbanisation
India’s organised retail sector is expected to add about 49 million sq ft of space in coming
years to the end of 2032, of which 71% will be in metros and tier-I cities, according to AT
Kearney

Dispersed urbanization and an urban-rural income continuum: By 2030, 40% of Indians

will be urban residents. The top nine metros and 31 developed towns will be significantly
richer than other cities. However, there will also be more than 5,000 small urban towns
(50,000-100,000 Population) and >50,000 developed rural towns (5,000-10,000 Population)
that already have very similar income Profiles
Growth of rural consumption: Rural per capita consumption will grow to 4.3 times by
2030, compared to 3.5 times in urban India. With incomes in developed rural towns already
similar to those in small towns and greater internet penetration narrowing digital divides, the
erstwhile urban-rural comparison may no longer be the most accurate view to assess
aspirations and preferences across India. Although the gap is narrowing, opportunities for
developed rural consumers will be truly unlocked only by tackling head-on, the issues of poor
infrastructure (roads, power, internet), access to organized retail and financial inclusion.
Source: AT Kearney

Population Growth

Population growth across urban and rural India

Source: AT Kearney

Unlike many ageing nations in the West and East, India will remain a nation of the
millennials with a median age of 31 in 2030.

A working age majority: With a median age of 31 in 2030 (versus 42 in China, 40 in the
US) India will remain one of the youngest nations in the world with one of the largest
working-age populations. India will add more working-age citizens to the world than any
other country.

Young millennial households: India will add nearly 90 million new homes lead by
millennials who were born into liberalized India. Having grown up with better education/
employment opportunities, and having higher incomes, they will likely break away from the
typical attitudes of their preceding generations.

Digital Generation: In 2030, India will have Approx 370 million Generation Z consumers of
ages 10-25, who would have grown up in an India with internet, smartphones, digital media
and digital consumption platforms. As they start consuming, earning and spending, they will
actively use technology enabled consumption models, and in turn influence consumption
behaviour of their household

Source: AT Kearney

CONCLUSION Riding on economic growth and widespread consumerism, the Indian

consumer market and retail tread has been growing rapidly. With the rising affluent middle
class society, changing consumption patterns, rise in number of dual income nuclear families
and the youth driven culture are some of the factors fuelling the new wave of consumerism.
The rapidly evolving Indian consumers are now seeking out a different shopping retail
experience with increasing awareness of information and technology. India is now ready to
leapfrog into the next stage of evolution where a large number of Indian and International
retailers build sizeable scale models across the country. Opportunities are abundant, across all
formats and categories, as the new Indian consumer has clearly demonstrated a readiness for
all organized retailing segments. As has been the case in retail markets across the globe the
influx of foreign brands and funds into the country will change the retail landscape. It will
make domestic players grow bigger and more innovative in the face enhanced competitive
pressures. The Indian retail sector is at an inflexion point where the growth of organized
retails and growth in the consumption by the Indian populations going to take a higher
growth and traction